Odd Reason To Be In Tax Court

 

Not all accountants practice tax.

To the contrary, I suspect most accountants do not. The confusion, I suspect, has to do with the CPA license. One associates the license with practicing at a CPA firm, but that is not necessarily true. Most accountants do not practice at a firm, and just practicing at a firm does not mean that one works tax. I have worked with a firm my entire career, and there have been many CPAs – auditors, forensics, valuation experts and so on – who have little crossover with tax. Step outside a firm – say internal audit or accounting at a corporate employer – and those numbers only increase.

I am looking at a pro se case in the Tax Court.

We have discussed pro se many times. It is commonly described as a taxpayer representing himself/herself before the Court. That technically is not true. A taxpayer can have professional representation and still be considered pro se. What it means is that the representative does not have a license to independently practice before the Court. The representative can act as an agent, advocating for and advising a taxpayer, but without that license the taxpayer is still considered pro se.

That license requires one to pass an exam, and the Tax Court exam is commonly considered one of the more challenging exams in tax practice. The exam BTW is not about tax law; rather it is about rules and procedures at the Tax Court. I have been involved in this area for decades, and I admit that those rules and procedures can be a bit … arcane.

Eva Zaczek finds herself in Tax Court. There is only one issue: how much does she owe? The answer in turn depends on how much of her Affordable Care (that is, Obamacare) subsidy was overpaid and now has to be returned. The concept is straightforward: make little money and the subsidy might fully pay for the premiums; make too much money and there is no subsidy at all. The rub is that someone is applying for the subsidy early in the tax year, before knowing what income for the year will be. Take a promotion or job change or marriage – or just ignore the too-much-income issue altogether - and the numbers can swing hard.

The IRS sent Eva a Notice of Deficiency for $2,418.

COMMENT: Eva sent a handwritten tax return, and the IRS made mistakes reading her writing.  

To its credit, the IRS admitted its mistake and revised the balance due to $900.

Eva challenged the calculation.

The rub was line 11 of Form 8962 Premium Tax Credit.

Both Eva and the IRS agreed that the number in box 11(b) should be $7,294.

This box represents the maximum premium that can be subsidized.

Both agreed that box 11(c) should be $9,057.

This amount represents the amount of premium the taxpayer is expected to pay himself/herself, without subsidy.

Eva calculated box 11(d) as $1,763 ($9,057 - $7,294).

Eva got the numbers reversed. Box 11(d) should be minus $1,763 ($7,294 - $9,057).

So?

If you read the instructions, box 11(d) cannot go below zero ($-0-).

Eva was convinced she owed the IRS $1,763.

The IRS said no, no: you only owe us $900.

And Eva was in Court arguing that she owed the $1,763 and not the $900 the IRS was seeking.

Here is the Court:

      

I will spare both of us the difference in tax law between a “deficiency” and a “balance due,” other than to point out the IRS notice that got Eva into Tax Court is called a Notice of Deficiency.

Pro se cases have a reputation for being entertaining, and we have looked at a number of them over the years.

But to go to Tax Court to argue that one owes more than the IRS wants? And this action from an accountant?

I consider this to be shade: 

I truly, truly hope that Eva doesn’t practice anywhere near a tax return.

This time we talked about Eva Zaczek v Commissioner, docket 4667-25S, filed 7/15/26.

What If The IRS Changes Mailing Addresses?

 

I am looking at case filings in the Tax Court electronic filing system.

Not mine, thankfully.

It reminds me of something.

Tax CPAs (likely) use professional preparation software. Over the years I have used several myself. Recent years have introduced the “suites,” whereby preparation software is bundled with other software (research, time and billing, practice management, yada yada). It makes it almost impossible to change, as one then has to change almost all practice software and also learn a new suite It is a monumental pain.

The preparation software has updates, of course. Sometimes I would see a prior year updating, beggaring the question: why? Why is the 2021 preparation software updating in 2025, for example?

Let talk about Boparai. As I write this, there have been 40 back-and-forth filings with the IRS, with the first one starting last spring (May 27, 2025). Rosie Boparai recently lost a motion, and this case will not go to trial.

Rosie extended her 2019 tax return from April 15, 2020 to October 15, 2020.

Rosie did not file a return, however.

Three years later (on July 17, 2023) she appeared in person at the Sacramento Taxpayer Assistance Center and attempted to hand-deliver her 2019 tax return. The TAC employees refused to accept her return, however, because she had not made an appointment.

COMMENT: I have a serious problem here. I can see if someone has a tax issue that needs research and investigation, but Rosie was just dropping off a paper return. Someone could have stamped it received and put it into the processing pipe. Is it unconventional? Yes, but so what? A taxpayer tried to comply.

Facing failure at the TAC, Rosie put the return in the mail. The return showed a refund, but she included a check for $10,000. Rosie was figuring that – sending money and simultaneously requesting a refund – someone would pay attention to her return.

NOTE: Consider the calendar here. The return was due April 15, 2020. It was extended until October 15, 2020. She put it in the mail July 17, 2023. As long as that extension was valid, Rosie is within the three-year statute of limitations for her 2019 refund.

Rosie mailed that return to San Francisco.

An average person would say she filed. A bit late, yes, but still within the rules.

Problem: the IRS closed its Fresno and San Francisco mailing addresses by the end of 2021. 

This would not have been a problem had she filed her 2019 return on time. 

The post office marked the envelope as undeliverable. Rosie asserted she never received the returned mail.

The IRS issued a NOD in February 2025.

Rosie filed a petition in Tax Court.

She also filed (or refiled, possibly) her 2019 return in May 2025.

The IRS agreed that Rosie did not owe money. The IRS however had no intention of refunding her 2019 overpayment. You know why: the return was filed outside the three-year statute of limitations.

Rosie was in Tax Court fighting to have her July 17, 2023 TAC visit/mailing to San Francisco count as filing her return.

Here is Reg 301.7502-1(c)(1):

That “properly addressed to the agency, officer, or office” language was brutal to Rosie.

A return filed in 2023 (yes, that would include a 2019 return filed in 2023) should have gone to Ogden, Utah or Cincinnati, Ohio.

Not San Francisco.

The return was not “properly addressed.”

July 17, 2023 did not count.

Which meant that Rosie had not filed her return within the three-year window. There would be no refund.

My thoughts?

The Court was right.

A lot of tax is procedural: correct form, correct date, address and so on. Rosie missed a step.

I also see Rosie being denied at the TAC as IRS negligence, impeding her attempt to comply and causing her irreparable harm.

My argument is one of equity. The Tax Court is not a court of equity, however; it is a court of law. A court of equity can … bend … the law a smidge to get to fairness. The Tax Court does not have this wiggle room. It has to follow the rules.

I expect cases like this to go away with electronic filing. Oh, I suppose there might be the oddball case here or there where the software glitches, but that should be rare.

And there is a reason why I see my preparation software updating several years after the fact.

Today we looked at the DAWSON filings for Boparai v Commissioner, Docket No. 7789-25.

What Makes A Tax Extension Valid?

 

You file an extension on April 15th for your personal tax return.

Is the extension valid if you wind up owing money but entered zero (-0-) on line 6?

What if you entered a balance due on line 6 but entered zero (-0-) on line 7?

A couple of things come immediately to mind:

(1)  There are clients – numerous clients – who have no intention of fully paying their taxes by April 15^th. The best the CPA can do is get them to pay something - anything - to take the pressure off the tax due (plus interest and penalties) when they finally file. I have heard the scold many times over the decades: the tax should be fully paid-in by April 15; the extension is for time to file not time to pay; yada yada. This is not a classroom, folks. This is real life, and I cannot control people. I think that I do some good just by nudging clients closer to compliance with the tax law.

(2)  Are you trying to get me sued? What if I (i) enter a number on line 4 but (ii) file the extension with no payment due (line 6)? Will the IRS bounce the extension? This is where procedural consistency is critical. I need high confidence in how the IRS will process this extension.

Let’s look at Karp.

The Karps wanted the IRS to apply a 2016 tax overpayment (of $336,558) to a later tax year.

Problem: The Karps were not diligent about filing tax returns on time. They were counting on that huge overpayment/carryover to keep them out of trouble. While true, there are ways this can blow up.

The IRS told the Karps that the 2016 overpayment could not be applied to 2017 because they filed the 2016 return in April 2021.

COMMENT: That’s how it blows up: you have to get that return in within 3 years (plus the extension, if you obtained one). The 2016 return was due April 15, 2017. Three more years is April 15, 2020. The IRS did not receive the return until April 2021 - a year late.

The Karps responded with proof that the IRS received their 2016 return on October 15, 2020.

COMMENT: Good! That is why practitioners recommend certified mail (which is becoming a dinosaur as we move to electronic filing) with proof of mailing.

FURTHER: We are not told whether the Karps actually waited until the last day for filing or were instead impacted by IRS closures during COVID.

The IRS backed down when presented proof. The IRS refunded $154,720 and credited the remaining 2016 overpayment to 2022.

The IRS then changed its mind.

Huh?

The IRS argued that the 2016 extension was invalid.

Because it was invalid, there was no extension until October 15, 2017.

Which means that the 2016 return filed October 15, 2020 was outside the three-year window (without the extension, that date was now April 15, 2020). The IRS wanted its $154,720 back. Oh, the IRS also reversed the portion of the overpayment that was credited to 2022.

“No soup for you” snarled the IRS.

Let’s catch our breath.

First, what was the IRS’ reasoning to blow up the 2016 extension?

The IRS looked at Form 4868 and saw zero (-0-) on both lines 5 and 6.

Mind you, the Karps had a sizeable overpayment from 2015 to 2016 (in fact, the Karps had reported sizeable overpayments for years). There was enough there to pay a subsequent year’s tax and send the Karps a refund check for 2016.

The IRS was relying on a Tax Court case (Crocker) where the taxpayer did not appear to even try to estimate the tax due on the extension. When finally filed, the return showed significant additional income and tax (because: of course). The Court agreed with the IRS that the extension was void. The return was late. Penalties. Interest. Brussels sprouts and lima beans. It was catastrophic.

Second, how was the IRS to know?

The 2015 return had not been received or processed by the time the 2016 extension arrived. Maybe - if the Karps ever got around to filing a tax return on time - the IRS might have had a clue of knowing what they intended for 2016.

While I disagree, I do have some sympathy for the IRS.

First, the Court noted that the Karps had a track record of (a) huge overpayments that (b) they repetitively applied to the following tax year.

COMMENT: I personally think this was THE factor that saved the Karps here.

The Karps looked at that overpayment and said: we do not owe anything for 2016. They then put zeros all over that Form 4868. Technically, they should have put (1) estimated gross tax on line 4; (2) the overpayment on line 5: and the (resulting) negative amount on line 6. The Karps did not do that, explaining that they mistakenly thought that the tax estimate was the amount they would be required to pay upon filing. The Court considered it a ministerial error, and they had conflated gross tax with net tax.

The Court also pointed out – devastatingly, I think – that the IRS initially accepted the 2016 return, including the extension as filed. That is why the IRS now wanted the refund check back.

Second, the Court noted that the IRS was put in a tough spot, as it did not have a 2015 return when processing the 2016 extension.

While it was easy for the Court to point out that the Karps had applied their prior overpayments, the IRS could not automatically predict that they would do so again. This dance was getting close to: heads you win, tails I lose for the IRS.

The Court pointed out that the Karps were still within procedural guardrails. They pushed it, but they got it done within three years.

Technically correct, but not an optimal real-world approach to tax filing.

The Court ordered summary judgement for the Karps and instructed both sides to sort the dollars involved and report the results back to for judgement.

I point out that this was not a Tax Court case. It was heard in the Court of Federal Claims, which hears civil claims against the federal government. While specialized (cases against the U.S. government), it is not the same specialization as the Tax Court (which hears only tax cases).

The cynical part of me wonders if the verdict would have been the same had the case gone to Tax Court. The Karps had an advantage: many cases go to Tax Court because one does not need to pay the tax before bring suit in Tax Court. Here, the Karps had already paid the tax (hence the huge overpayment), so filing outside the Tax Court was an option.

Our case this time was Karp v United States, U.S. Court of Federal Claims, No. 23-926, filed May 21, 2026.